LONDON: European stock markets struggled on Thursday (Jan 16) as investor attention moved beyond a trade deal signed by China and the United States to corporate earnings and the global economic outlook.
Shares in European carmakers hit the brakes as Germany's defence minister confirmed that the US threatened to impose a 25-per cent tariff on European auto exports if continental heavyweights continued to back a nuclear deal with Iran.
Most European stock markets were lower "with the US-China signing ceremony a day earlier failing to provide much excitement or spark another rally", remarked Craig Erlam, senior market analyst at traders OANDA Europe.
The dollar dropped against the pound but rose versus the euro and yen, while oil prices firmed.
After months of on-off talks between economic superpowers China and the US, President Donald Trump put pen to paper on Wednesday on an agreement that lowers tensions between the two and provides a boost to the global outlook.
Equities have been rallying since last month's announcement of a deal to ease a long-running stand-off that has stunted growth prospects around the world.
"There's relief at the situation progressing in a positive way that removes some uncertainty but disappointment at the same time that tariffs remain in place and will for the foreseeable future," Erlam said.
"Thankfully, (the current) earnings season will provide a handy distraction."
The trade pact - the first part of a wider agreement - includes pledges from Beijing to boost purchases of US agricultural goods and other exports for two years, protects US technology, and provides enforcement mechanisms allowing Washington to impose penalties that Beijing cannot respond to.
In return, the US has cut tariffs on some Chinese products and cancelled others that had been lined up, though levies remain in place on goods worth hundreds of billions of dollars, which Trump said will stay in place until the next phase of talks is complete.
The Dow and S&P 500 hit records on Wall Street on Wednesday and pushed further into positive territory in midday trading on Thursday.
US TARIFFS THREAT
On the corporate front, shares in European carmakers dropped after Germany's defence minister confirmed a newspaper report on the US tariffs threat.
"This expression or threat, as you will, does exist," Annegret Kramp-Karrenbauer told a press conference in London in response to an initial report in the Washington Post.
The US daily said Trump made the threat if Britain, France and Germany did not formally accuse Tehran of flouting the 2015 nuclear deal.
Share prices of BMW, Renault, and Volkswagen all ended the day with losses of more than 1.0 per cent.
Key figures at 1645 GMT:
London - FTSE 100: DOWN 0.4 per cent at 7,609.81 points (close)
Frankfurt - DAX 30: FLAT at 13,429.43 (close)
Paris - CAC 40: UP 0.1 per cent at 6,039.03 (close)
EURO STOXX 50: UP 0.1 per cent at 3,774.14
Tokyo - Nikkei 225: UP 0.1 per cent at 23,933.13 (close)
Hong Kong - Hang Seng: UP 0.4 per cent at 28,883.04 (close)
Shanghai - Composite: DOWN 0.5 at 3,074.08 (close)
Euro/dollar: DOWN at US$1.1135 from US$1.1150 at 2200 GMT
Pound/dollar: UP at US$1.3070 from US$1.3038
Euro/pound: DOWN at 85.19 pence from 85.52 pence
Dollar/yen: UP at 110.15 yen from 109.90 yen
Brent Crude: UP 1.1 per cent at US$64.71 per barrel
West Texas Intermediate: UP 1.4 per cent at US$58.61 per barrel